Renting Can Cost 7 Times More Than Owning

Owning a home makes financial sense for a lot of current renters, but many are reluctant to take those first steps. Here's how to help them move forward.
NAR: REALTOR® Magazine Online
Renting can cost more than seven times more than owning per year, according to a newly revised consumer education brochure from the NATIONAL ASSOCIATION OF REALTORS®.

The brochure poses the question “Why rent when you can buy?” and challenges certain assumptions about renting versus buying. Its goal: To serve as another tool to help you work with customers to evaluate whether home ownership is the best move for them.

“Housing is a good investment, and owning a home makes sense for a lot of current renters, but many would-be home owners are reluctant to take those first steps,” says 2006 NAR President Thomas M. Stevens, senior vice president of NRT Inc., from Vienna, Va. “Given their experience with home buyer concerns and insight into local markets, REALTORS® can counsel consumers about their options and provide the information and support people need to begin their journey toward home ownership.”

Here are some key benefits of buying, as noted in the brochure:

    • The Federal Reserve Board estimates that home owners have a net worth nearly
      36 times more than that of renters.

    • Over the past 10 years, the cost of rental housing in the United States has
      increased an average of 3 percent per year; average rents are projected to
      rise 4.1 percent this year alone. With a 3 percent annual increase, a current
      rental payment of $1,000 per month would increase every year and amount to
      $137,567 after 10 years, with no wealth accumulation.

    • By contrast, a $210,000 home purchased today with a down payment of $10,000
      and a 20-year fixed rate mortgage at 6.5 percent would cost a steady $1,100
      per month and yield a net worth of $138,521 after 10 years, assuming an
      historic 4.5 percent annual appreciation rate.

“The decision to become a home owner involves financial and emotional considerations,” Stevens says. “Our REALTOR® members help millions of people into homes every year, one family at a time.”